Watch out for sector funds like gold or technology because they're very volatile. If you look at the records for the past 10 or 20 years of these fund types, some of them are up 12 years and down 9. Also just because a fund went up 100% one year, doesn't mean that it will continue on the same hot streak the next few years. Consider Fidelity Select Technology FSPTX for example, it went up 74.16% in 1998 and 131.75% in 1999, but the next 3 years it went down about -100%! Could you imagine buying it in 2000 because of the great returns in 1998 and 1999 thinking, "technology is the future, it's a no brainer!" You certainly would have been in for a rude awakening!
The only technology fund I would consider investing in right now would be T. Rowe Price Media & Telecom PRMTX because it seemed to have rebounded rather well after the 2000-2002 down market. However, this is for aggressive investors only, who can let their money sit for about 10 years.
Gold or funds like Vanguard Precious Metals and Mining VGPMX and USAA Precious Metals and Minerals USAGX have been on a tear in the last 6 years, but if you look at their performance the decade before the 2000-2002 down market, these types of funds did poorly. They both have a very high standard deviation risk levels ranging from 24% to 36%. This is highly volatile compared to the Vanguard Index 500 fund VFINX , which has standard deviation risk levels ranging from 7% to 15%. A short term bond fund like Vanguard Short Term Treasury VFISX has standard deviation risk levels ranging from 1.49% to 2%, which is very stable compared to a stock fund.
Other popular sector funds are Financial, Energy, Healthcare and Real Estate. Energy funds are the most volatile of these four, but not as risky as gold, international emerging markets or technology. Fidelity has a huge list of sector funds they offer if any aggressive investors are interested in a single industry fund.
I hear a lot of infomercials on TV advertising how easy it is to buy houses with no money down and rent them out for more than the mortgage and other expenses. If you purchase a new home, what about closing costs, utilities, property taxes, homeowners and mortgage insurance? What if your home renter says something needs to be repaired? What if your renters don't pay or move out sooner than expected and you can't find someone else to replace them? Will you be able to sell it for more than you paid if no one rents? I also hear about people who buy homes, fix them up and sell them for a lot more money. Both of these ideas sound easier said than done. I'm not a Real Estate expert, but the people who do this are probably in high demand new housing markets and Michigan, doesn't seem to be one of them.
Real Estate funds have been on a tear in the last 5 years, but they invest in leasing shopping mall space, office space, apartment rentals, other buildings, etc.
Here are some REIT funds to consider for moderately aggressive investors who can hold their money for at least 6 years:
American Century Real
Estate Inv REACX
CGM
Realty CGMRX
Cohen & Steers Realty Shares CSRSX
Fidelity Real Estate Investment FRESX
T. Rowe Price Real Estate TRREX
Vanguard REIT Index VGSIX